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GM Financial’s Role as GM Captive Expanding in November

FORT WORTH, Texas — With its U.S. penetration of General Motors retail sales climbing from 11% in the year-ago period to 33% in the quarter ending Sept. 30, GM Financial announced yesterday during its quarterly investor call that, effective Nov. 3, it will expand its role in the automaker’s loan subvention programs with the removal of Ally from the channel.

According to the captive’s President and CEO Dan Berce, GM and GM Financial’s remarketing organizations are now realigned under the GM Financial brand, with the captive now responsible for asset remarketing of the company’s off-lease vehicles as well as GM Company cars and rental vehicles.

The executive added that the captive’s funding platform continues to expand, having raise more than $20 billion globally in long-term financing through secured and unsecured debt issuances.

“We expanded our captive presence with GM’s customers and dealers …,” Berce said. “We have also taken further steps in our evolution as a captive.”

On Feb. 3, GM ended its leasing relationships with Ally Financial and U.S. Bank, making GM Financial its exclusive subvented lease provider for Buick and GMC. That relationship was extended to Cadillac in March and Chevrolet in April.

In the quarter ending Sept. 30, General Motors’ new-vehicle loans and leases accounted for 87.8% of GM Financial’s $3.2 billion in consumer originations in North America, up from 65.5% in the year-ago quarter. Lease originations totaled $6.2 billion in North America, up from $1.7 billion in the year-ago quarter.

“We are now doing virtually all of GM’s leasing in the U.S. and Canada,” Berce noted. “The penetration number here is 99%.”

For the quarter, the captive reported net income of $179 million, up from $158 million in the year-ago period. Through the first nine months of the year, earnings totaled $515 million, up from $478 million in the year-ago period.

Pretax earnings during the quarter totaled $231 million, up from $208 million.

Including international markets, consumer originations totaled $4.7 billion, up from $4.1 billion in the year-ago period. Lease originations totaled $6.2 billion, up from $1.8 billion in the year-ago quarter. For the first nine months of the year, consumer originations totaled $13.1, up from $11.1 billion on a year-over-year basis.

Consumer receivables 31-to-60 days delinquent accounted for 4% of GM Financials portfolio for the quarter, up slightly from 3.9% in the year-ago quarter. Accounts more than 60 days delinquent accounted for 1.6% of the captive’s portfolio, down slightly from 1.7% in the year-ago period.

Annualized net credit losses were 1.9% of average consumer finance receivables during the quarter, down slightly from 2% in the year-ago period.

Officials also reported total available liquidity of $11.6 billion at the end of the quarter, consisting of $1.6 billion in cash and cash equivalents, $8 billion in borrowing capacity on unpledged eligible assets, $1 billion in borrowing capacity on unsecured lines of credit, and $1 billion of borrowing capacity on a junior subordinated revolving credit facility from GM.

“The trends here are pretty evident that we have grown the prime and nearprime portions of our origination mix significantly year over year,” Berce said. “In fact, if you add up prime and nearprime for the September 2015 quarter, it reflects 81% of total originations, up from about 56% a year ago.

“I will point out that subprime lending has not decreased,” he added. “In fact, in absolute dollars, it is higher year over year. But as a percent of total originations, it is down because of the growth in prime and nearprime.”